'Are We All Going to Be Audited Forever?' Being Pro-Israel Landed This Group in a 7-Year War with Obama's IRS

PENN VALLEY, Pa. – There's talk of how the Obama administration weaponized many federal agencies. The Marcuses of Penn Valley, Pennsylvania, know it's true because they had to fight some of those weapons in a years-long struggle with the Obama-era Internal Revenue Service.

And it appears it was just because the non-profit they were starting may have been a little too friendly with the state of Israel.

They wanted tax-exempt status for their organization Z Street – the Z standing for Zion. But instead of getting the normal approval in three to six months, the IRS held up their application for seven years – beginning in and continuing through the Obama years.

Lori Lowenthal Marcus, the founder and president of Z Street, said she and her husband heard "there's a special unit in Washington, DC that looks at these applications to determine whether the organization's activities are inconsistent with the Obama administration's policies."

Viewpoint Discrimination

Z Street believes in the right of Jews to live anywhere, including biblical Judea and Samaria, the areas commonly known as the "occupied territories," which include cities and towns called "settlements."

"The IRS officials tried to see whether they could revoke tax-exempt status for organizations that support what are called 'the settlements,' " Marcus told CBN News.

That's an example of what's called "viewpoint discrimination," where an organization gets treated differently by the government because its viewpoints are different from the government's positions – in this case, those of the Obama administration in the Middle East.

"This was part of an overall campaign being waged by the Obama administration to isolate Israel for its settlement activity," Jonathan Schanzer of the Foundation for the Defense of Democracies told CBN News.

A Seven-Year War With the IRS

But the Marcuses are lawyers, so Z Street sued the IRS, saying the agency was violating their constitutional rights by denying them their application for tax-exempt status as a non-profit group. The IRS fought back with all sorts of arguments, all of which were eventually thrown out by courts.

For instance, Marcus said the IRS tried to make her and her husband believe, "Oh, we can't sue them because they're the government. Excuse me? The Bill of Rights was created to protect citizens from constitutional violations by the government."

The tax agency then hinted that Z Street would be supporting terrorism if it supported Israel.

Marcus scoffed at that idea, saying, "Israel is a country where terrorism happens to Israelis. They're not the perpetrators of terrorism."

The Marcuses also found during their seven-year battle that the government was asking questions about the views of other pro-Israel non-profit groups.

"They were asked, 'What are your religious beliefs about the existence of the land of Israel?' That's astounding that the IRS, anyone at the IRS, could think that that would be a legitimate question," Marcus said.

A Fight Too Costly for Many Others

As lawyers, the Marcuses could afford to wage this war for Z Street against the IRS. But non-profits without lawyers in their ranks might have found it way too expensive.

"It would have cost close to or over a million dollars," Marcus estimated.

She revealed, "I do know that there were other organizations too afraid to take on the IRS. And I really do understand that. It's a scary place to have as an enemy."

Marcus explained she and her husband and Z Street board members would ask worriedly, "Are we all going to be audited forever?"

But the feds finally gave up and settled on Feb. 1.

"And I'm sure that they thought that they would just grind us to dust. But they didn't realize we're like terriers," said the feisty female lawyer. "We got our teeth into the calves of these people and we didn't let go."

So that was Z Street's fight with the federal government, but there's evidence of this same sort of antipathy towards Israel in more agencies than just the IRS – like at the State Department.

'It Isolated Israel'

"It isolated Israel as a policy," Schanzer said of the Obama administration and its State Department. "The decision to shift toward Iran in particular, also probably the Muslim Brotherhood during the Arab Spring – this was the inclination of those within the State Department and within our diplomatic ranks."

But such bias meant taxpayer money ended up funding groups which supported Palestinians but opposed Israel.

"We provide roughly $600 million a year as US taxpayers to the Palestinians," Schanzer explained.

Dollars from government agencies like the US Agency for International Development (USAID) are supposed to basically be charity, but it can be hard to find out just where the money is – or isn't – going.

"We had real issues with the lack of transparency at the State Department," said Yona Schiffmiller at NGO-Monitor in Israel.

He told CBN News, "It was very difficult to ascertain which were the organizations receiving funds, what the size of the funds were, and for what purpose."

But Schiffmiller noted, "There are instances that we've identified where the money is going to groups who are acting in improper ways."

Kids' Camp That Takes Them to See Anti-Semites

He spoke of USAID giving money to a Quaker group called Friends United Meeting that brings Palestinian kids from America over for a summer camp in Ramallah in the West Bank (biblical Judea and Samaria).

"The campers are taken to a memorial for Palestinian martyrs. They were taken to meet a woman who was notorious for using her social media platforms to spew anti-Semitism and call for violence," Schiffmiller stated.

"They met with a member of the PFLP – the Popular Front for the Liberation of Palestine – which is designated as a terrorist organization by both the United States and Israel," she said.

Schiffmiller was quick to explain that USAID puts much more of its money into the West Bank than Israel because the Palestinian territories are so much poorer and in need of aid than the fairly well-off Jewish state.

But he added because some of that money ends up getting used for other than charitable purposes, "There is definitely room for improvement in US funding."

"Some of the funds are easier to track than others," Schanzer concluded. "Overall, though, I think that the American taxpayer has reached a point of frustration."

Palestinian State More Important Than Real Peace?

Z Street's Marcus blamed holdovers in the diplomatic service from previous administrations.

"I do see those at the State Department continuing to hold what I think are ridiculous views about how to move forward. The peace process should have as its end goal peace," she argued. "And it seems like it's had as its end goal a Palestinian state regardless of peace for quite a long time."

As for the IRS, Marcus said while Z Street and other pro-Israel groups were being denied 501c3 tax-exempt status, other groups were approved – specifically those that provide funds for activities in Gaza.

"Now, Gaza is run by Hamas, which is a terrorist organization," Marcus explained. "It's recognized by the US government as a terror organization. If those groups weren't held up and they stated clearly they were spending money in Gaza, why were we held up?"

Marcus said of Z Street's seven-year battle to get tax-exempt status, "It was mind-blowing, really, that we had to fight the government – the Department of Justice – as it defended the IRS and its unconstitutional actions and discriminating against American citizens who held particular political views."

With the Trump administration being so friendly towards the state of Israel, maybe this is going to go away. But as Trump himself might point out, there's still the so called "Deep State" and the "Washington Swamp" that need to be cleared out before such problems can be totally cleared up.